The Department of Finance (DOF) has indicated that the Marcos administration may need to adjust its economic growth targets due to the lower-than-expected expansion recorded last year.

Finance Secretary Ralph G. Recto emphasized the need for the Development Budget Coordination Committee (DBCC) to set "more realistic" gross domestic product (GDP) targets for the medium term.

“We're discussing right now because I think we have to come up with more realistic targets,” Recto told reporters.

The DBCC, responsible for determining the government's macroeconomic assumptions, met last Feb. 5. However, Recto said that the inter-agency body did not make any changes to its current targets.

At present, the DBCC has a growth target of 6.5 percent to 7.5 percent for 2024, and a GDP assumption ranging from 6.5 percent to 8.0 percent for the period spanning 2025 to 2028.

“Don’t you think we need some adjustment there? I think we need to. Something more realistic, but still high for 2024 and beyond,” Recto said.

The Philippine economy expanded at a slower rate of 5.6 percent last year, missing the government's target of 6.0 percent to 7.0 percent, as elevated interest rates, stemming from a high inflation environment, subdued consumption.

With inflation slowing down since December, Recto said that the likelihood of the Bangko Sentral ng Pilipinas (BSP) implementing a rate hike in the near future was very low.

“I don't expect a future rate hike [by the BSP’s Monetary Board] because inflation is going down and it seems like it's going down globally also,” Recto said.

The central bank’s MB, which will meet on Feb. 15, is responsible for controlling the country's money supply and interest rates to maintain stable prices and support economic growth.

To control high inflation, the BSP has raised policy rates by a total of 450 basis points since May 2022, bringing the benchmark policy rate to 6.5 percent.

“I expect maybe in the second half, there's a possibility na bumaba ‘yan [it would go down],” the DOF chief said.

Meanwhile, Recto, the government's representative to the MB, said the central bank is likely to consider the actions of the US Federal Reserve as a key factor in determining the timing of any potential rate cut.

“I think the key is what happens with the Fed – are they [going to] start reducing rates? If they do, then possibly we can start reducing rates. I think the Fed needs to cut first then we take a look at our own data,” he added.

In January, the inflation rate dropped to 2.8 percent, marking its slowest pace in more than three years, from 3.9 percent in December.

The consistent decline in headline inflation has kept the pace of price increases within the government’s target range of 2.0 percent to 4.0 percent for the second consecutive month.